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Clinton Proceeds With Plan To Privatize Security Checks

The Clinton Administration is pressing ahead with a plan to transform background investigations of many Government employees into a profit-making business run by a newly created private company, despite protests from some members of Congress, Cabinet officials and investigators worried about confidentiality and security lapses.

Under the plan, which has been in the works for a year and a half and will take effect at the end of this week, about 40 percent of security and other background checks on Government employees and job applicants will be taken over by an employee-owned, profit-seeking company. The employee-owners will be the 700 workers in the Office of Personnel Management's Office of Federal Investigations, which now does the checks.

The office does not conduct investigations for White House or Cabinet-level appointees, which are handled by the Federal Bureau of Investigation, and does only limited work for the Defense Department, which has its own investigative service.

Even so, critics worry that the plan could leave many Government agencies relying on an untested new company that may not have full access to law enforcement records.

Moreover, the critics said, it could place sensitive records about Government employees and job applicants in the hands of a business venture, raising concerns about the privacy of personal information when the White House itself has been found lax, at a minimum, in its handling of confidential background files. The Administration has been besieged in the last several weeks with questions about how it came to have F.B.I. files on prominent Republicans, among other people.

"Even within the Federal Government we've seen an abuse of sensitive files, as the current F.B.I. case illustrates," said Senator Paul Simon of Illinois, a Democrat who raised objections to the plan last year. "Turn it over to private investigators and the invitation to abuse is going to be very real. We're going to see privacy problems, security problems and sloppy work."

The Office of Federal Investigations does the bulk of the background checks for the Energy Department, the Treasury Department, the Immigration and Naturalization Service and other departments and agencies that need to investigate new employees and update security clearances for current employees. Its work includes checking criminal and other legal records, reviewing employment and academic histories and interviewing associates or neighbors of some higher level employees.

Senator Simon and Representative Thomas M. Davis 3d, a Virginia Republican, have introduced legislation to delay the plan for two years to provide more time to study its implications. But they acknowledged that the bill has almost no chance of passing before the plan takes effect.

Under the privatization plan, the investigation office's functions would be transferred to the new company, called U.S. Investigations Services. Most current employees have agreed to join the new venture as an alternative to being laid off or finding other government jobs.

The company has been granted a contract to do all the background checks for the Office of Personnel Management for three years. After that it will have to compete for the business with other private services. In the meantime, it is expected to solicit contracts from state and local governments and private companies in an effort to expand.

The proposal grew out of the Administration's efforts, overseen by Vice President Al Gore, to pare hundreds of thousands of Federal jobs by finding innovative and more efficient ways to run the Government.

"It is a bold experiment that not only serves our employees, our customers and the taxpayers, but is moving us toward the smaller, flatter, more efficient, more market-driven government of the future," James B. King, director of the Office of Personnel Management, told a House subcommittee hearing on the issue several weeks ago.

Officials at the personnel agency said there would be adequate safeguards to assure there is no abuse of confidential information. The F.B.I's files, for example, will be available only to Government officials overseeing investigations by the private company, and not to the the company itself. And the officials said the new venture -- the first employee-owned company to be spun off from the Federal Government -- would maintain the quality of its services even as it tries to make a profit.

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"It will continue to offer our customers the highest standards of quality and integrity, and will give them the seamless transition we sought, with no confusion or disruption of service," Mr. King said.

A study sponsored by the Office of Personnel Management concluded that the privatization would save money for taxpayers over the long run by reducing the cost of investigative services, cutting pension costs as employees move to the private company and increasing Federal tax receipts from the company's profits. Over the next five years, the study estimated, the change would save $20 million to $25 million.

The General Accounting Office reviewed the study recently and said it agreed that "privatization would be likely to produce a net savings to the Government in the long term." But the G.A.O. added that "any new business faces many uncertainties that can affect profitability."

Some government agencies, such as the Drug Enforcement Administration, already use private outside contractors to conduct background investigations, and the Office of Personnel Management hires contractors itself for some work. The F.B.I. is hiring growing numbers of private investigators to help with background checks as a way of freeing its own agents to perform more pressing duties. But some Federal officials have expressed concern that the scale of the personnel office's privatization could leave them with security problems or difficulties in hiring large numbers of people.

Linda L. Robertson, an Assistant Secretary of the Treasury, wrote to Senator Simon last fall that the privatization could cause "significant disruptions" to the Treasury over the long run. Among other problems, she said, forcing the department to choose between the new venture and other private contractors would create a risk that "uniformity and standardization of investigative scope and the quality of investigations will be adversely affected."

Links between the personnel office's database and the Pentagon's investigative database could create "potential national security problems with contractors having access to this information," Ms. Robertson said. And she questioned whether the new company would be granted access to law enforcement records needed to do the background checks.

In a study due to be completed in the next few weeks, the General Accounting Office has also raised questions about access to criminal records. Mr. Simon said that when the G.A.O. contacted 12 states in March to ask about access by the new venture, six of the states said they would not or could not give data to private contractors.

Officials at the Office of Personnel Management said they were confident that they could retain access to law enforcement records by having requests funneled through some of the Federal Government personnel who will oversee the relationship with the privatized company.

But many employees of the investigative service said they were uncomfortable with their work becoming part of a for-profit business.

"I truly believe that the type of work we do is inherently governmental," said Deborah Apperson, a senior investigator in the investigations office. "There should be strict controls and strict access. It's not something that should have the profit motive behind it."

Another investigator in a field office, who spoke on condition of anonymity, said he would make more money under the privatization plan because he has enough years of service to collect a Federal pension while continuing to work at full salary for the new company. But he said he still opposes the plan.

"I think you're opening yourself up to a possible weakening of the whole national security function," the investigator said. "Those of us from O.P.M. who will work at the private company have integrity, but we won't be around forever, and the people who replace us won't have the same experience or salaries. Pretty soon it will be the junkyard guard dog company."